Professional Documents
Culture Documents
In the market:
X/Y = a/b
X/Z = c/d
Count the cross exchange rate: Y/Z và Z/Y
Using commodity currency to count cross
exchange rate
■ Example 1:
In the market
USD/CHF = 1,1807/74
USD/HKD = 7,7515/85
= (1/1,1807)*7,7585= 6,5711
CHF/HKD = 6,5281-6,5711
1 b
Sask X/Y = Sask X /Z * SaskZ/Y = SaskX /Z * =
Sbid Y /Z c
a c
X /Y = d => Y / X = b
b d
c a
Practice
X/Y = a/b
Y/Z = c/d
Sbid X/ Z = Sbid X/ Y * Sbid Y / Z = a * c
■ Example 3:
In the market:
EUR/USD = 1,4052/40
USD/HKD = 7,7515/85
GBP/EUR = 1.4388/28
■ Market B: USD/GBP = 0.4870/10
USD/EUR = 0.7072/16
Find opportunity to gain profit from doing arbitrage: GBP/USD
2- Arbitrages
1
Market B:
- GBP / USD = 0, 4910 = 2,0366 / 2,0533
1
0, 4870
Sask GBP / USD (A ) = ,0355 < Sbid GBP/ USD (B = 2,0366 :=> Gain profit
2 )
2- Arbitrages
■ A Canadian importing company has to pay 1 million USD in 1 month. The company
decided to buy buying option USD/CAD 1 month with some information in the
contract below:
- Exercise price 1,2345 CAD
- Option fees 0,02 CAD
Take an assumption: after 1 month, the spot exchange rate would be in 3 cases:
1. USD/CAD = 1,2821
2. USD/CAD = 1,2345
3. USD/CAD = 1,1904
In which case would the company exercise the contract? And how much CAD would
be sold in each case?
Buying/selling buying options- Answer
■Option fees = 1.000.000*0,02=20.000 CAD
If the company exercises the contract, the amount of CAD paid (fees included) will be :
1.000.000*1,2345+20.000=1.254.500 CAD
■case1: USD/CAD=1,2821, the company does not exercise the contract, the amount of CA
paid (fees included) is:
1.000.000*1,2821+20.000=1.302.100 CAD>1.254.500
=>the company will exercise the contract, the amount of CAD paid will be :1.254.500
■Case2: USD/CAD = 1,2345= exercise price, so the company could choose either to exercise th
contract or not and the amount of CAD paid will be 1.254.500 CAD
■TH3: USD/CAD=1,1904, the amount of CAD paid (fees included) will be :
1.000.000*1,1904+20.000=1.210.400 CAD <1.254.500
=> the company will not exercise the contract, the amount of CAD paid will be 1.210.400
Buying/selling selling options- Example
Sbid +Sask
Spot buying : Saverage=
2
Saverage (T2bid- T1ask) N
Forward selling: =
Sswap Saverage +
36000 + T1ask * N
Sbid+ Sask
Spot selling: = Saverage =
2
Saverage(T2ask - T1bid) N
Mua kỳ hạn: Sswap = Saverage +
36000 + T1bid * N
5.1. Swap between 2 banks
■ Bank A needs 1.000.000 Euro in the next 90 days while they have an
excessive amount of USD. How to do swap for bank A?
■ Information in the market:
EUR/USD = 1,1235/75
interest rate for 3 months:
USD: 4,25 – 4,5 (%)
EUR: 5,125 - 5,25 (%)
5.1. Swap between 2 banks
Step 1: At J+2, Bank A receives 1.000.000 Euro from their partner and sell
USD at the present with S average EUR/USD. The amount of USD sold is that:
1.000.000 * 1,1255 = 1.125.500 USD
Step 2: At J+2+90, Bank A pays 1.000.000 EUR for their partner and gains
backs an amount of USD with Sswap
5.1. Swap between 2 banks
1,1235 1,1275
1,1255
2
Forward selling:
Sbid (T2bid - T1ask) N
Sswap = Sask +
36000 + T1ask* N
GBP/USD = 2,0345/15
Interest rate for 2 months
GBP: 9 – 91/8 ; USD: 4 – 41/4
5.2. Swap between a bank and a customer
5.2.1. A customer needs a fixed amount of foreign currency - Answer:
- Step 1: Tại J+2, this company receives 1.000.000 GBP from their partner and sell
USD at the present with Sask GBP/USD = 2,0415
Þ The amount of USD sold is: 1.000.000 * 2,0415 = 2.041.500
- Step 2: At J+2+60, this company pays 1.000.000 GBP for their partner and gains
back USD with Dswap
5.2. Swap between a bank and a customer
2,0345( 4 9)60
Dswap 2,0415 2,0247
36000 9 * 60
The number of USD the company receives is: 1.000.000 * 2,0247 = 2.024.700 (USD)
5.2. Swap between a bank and a customer
- Step 1: At J+2, the company sell 1.000.000 GBP for the partner to receive USD with
Sbid GBP/USD=2,0345
the amount of USD received is: 1.000.000 * 2,0345 = 2.034.500
- Step 2: At J+2+60 the company receive 1.000.000 GBP from the partner and pay
USD back with Sswap:
5.2. Swap between a bank and a customer
■ Ex1:In Germany, Bank X needs 800.000 SEK in the next 90 days and has an
excessive amount of CAD. Do Swap for bank X.
■ Ex2: In England, Bank Y needs EUR in the next 90 days and has an amount
of 500.000 CHF. Do Swap for bank Y.
■ Ex3: In France, company M has an excessive amount of 850.000 AUD, they
need to use NOK in the next 90 days. Do Swap for company M.
■ Ex4: In England, company N needs to use 300.000 EUR in the next 90 days,
they have an amount of GBP. Do Swap for company N.
5. Swap – Practice